India since time immemorial has always been a ‘chai’ nation. The consumers for coffee, or rather ‘kaapi’ as is it known down South, have been relatively down although with the growth of cafe chains in the last decade has boosted the per capita consumption of coffee in India.
In 2012, the world’s largest coffee chain, Starbucks, came to India through a partnership with Tata Group. It is now almost eight years and the brand is growing, trying its hand to change the coffee culture in India and competing with existing brands. Now the brand is recognized all over India by coffee and tea consumer alike. With some 270,000 customers weekly and more than 150 outlets all over the country, Tata Starbucks reported a turnover of INR 4.4bn (US $62.3m) for the 2018–19 fiscal year.
The success of Starbucks is due to many factors -
“Third Place Experience” — This is what Starbucks considers to be the key factor. They want their consumers to come for the coffee, stay for the warmth, and return for the human connection
The amalgamation of Indian Culture — This is another factor that Starbucks has excelled in. For instance, their flagship store in Hyderabad — is designed with the elements of Hyderabadi pearls. The flagship store in Pune has copper elements because the city has a history of copper. It can be noted that no two Starbucks stores look similar, and the flagship ones are where a lot of local inspiration can be seen
Changing the Nomenclature — Starbucks offers three sizes for its drinks — Tall (12 oz ), Grande (16 oz ), and Venti (20-oz) rather than the normal Small, Medium, and Large.
Calling out your Name — Starbucks doesn't have to handwrite name, it can simply print an order number and give it to you. Instead, it chooses not to. It's not because they don't have the technology to do so, Starbucks has a state-of-the-art mobile app where to can place cashless orders on your way, pick them and go on in a jiffy. The fact that all baristas write your name on the beverages adds to the personalized, memorable nature of a visit to Starbucks. Calling your name out doesn’t just inform you that your drink’s ready; it also feeds your narcissism.
All the success factors of Starbucks can be regarded as Anchoring. Anchoring is an essential branch of Behavioral Economics. Anchoring is the process of planting a thought (anchor/ imprint) in a person’s mind that will later influence this person’s actions. One experiment asked participants to write down the last three digits of their phone number multiplied by one thousand (e.g. 678 = 678,000). Later people were given a ten-minute presentation on facts and figures from the housing market. When the people were asked to estimate the prices of houses, their answer was significantly influenced by the arbitrary anchor (678,000 in the above example). In practice, anchoring effects are often less arbitrary, as evident, the price of the first house shown to us by a real estate agent may serve as an anchor and influence perceptions of houses subsequently presented to us (as relatively cheap or expensive).
Starbucks knows how to perfectly anchor the consumer’s mind and has differentiated itself from others. Starbucks has differentiated itself from Cafe Coffee Day and other coffee chains, through its unique store ambiance and product names. This has allowed the company to break the anchor of CCD’s prices and charge more. Customers can expect a Starbucks grande cup of Americano for INR 240 as compared to a medium from CCD for INR 176.
How Starbucks sets an anchor in the mind of the Indian Consumer
Starbucks flagship store in Mumbai, located at the historic Elphinstone Building near Horniman Circle, Fort has
Indian Teakwood furniture
Floor design and interiors crafted by local artisans
The decor is locally sourced to capture the Indian heritage
Theme of the store is inspired by rich Indian spices
All this helps to create a homely feeling with a brand that originated in Seattle, 12,438 km away. Along with the homely feeling, Starbucks has enhanced its menu to the ‘homely’ taste as well, adding things like — Elaichi Mawa Croissant, Murg Tikka Panini, and Tandoori Paneer Roll. The 50/50 joint venture with Tata Group, which has experience in the real estate market, has helped Starbucks to acquire significant locations like Elphinstone Building with ease.
All these steps form an anchor in the mind of the Indian consumer. When the consumer walks into Starbucks she remembers the day when she sat on her teakwood table (Furniture in Starbuck’s store) to read about the historic Elphinstone building (Location of Starbuck’s store) while her grandmother cooked her favorite food using Indian spices (Theme of Starbuck’s store).
So the next time you catch yourself ordering Java Chip for the 3rd time in the week, just know its partially because of the excellent way Starbucks attracted you using economics.
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